First time home buyers here. My wife and I are 26 and make 110k gross. We about 1k in debt payments each month including student loans (grad school for wife) and car loans. We have been preapproved for 450k which is way more than we would ever consider. Is there a rule of thumb to try and stick to? We are in Nashville, TN and housing is still relatively affordable compared to other metros, but are sick of the increase in rent each year. We currently pay $1750.00 without issue.

ltnawlins said: First time home buyers here. My wife and I are 26 and make 110k gross. We about 1k in debt payments each month including student loans (grad school for wife) and car loans. We have been preapproved for 450k which is way more than we would ever consider. Is there a rule of thumb to try and stick to? We are in Nashville, TN and housing is still relatively affordable compared to other metros, but are sick of the increase in rent each year. We currently pay $1750.00 without issue.

How much extra beyond $1750/month are you comfortable paying? Consider that to be your max mortgage payment, and extrapolate a home price from that. Just remember, you need to add taxes and insurance and repairs/maintanence, all of which are included in your monthly rent payment but aren't part of the mortgage cost.

ltnawlins

New Member

posted: Jul. 16, 2016 @ 9:37p

The Nashville market was just named the strongest in the country. It's hard to know whether we should purchase something much simpler further out (30 miles) of town for 200k or spending more money now and settling in that home longer. Based off Zillow affordability calc, it says that a $2000.00 PITI payment would buy $350,000 which would buy a 3000 sqft house in surrounding cities or a new 1800 sqft house right outside of downtown Nashville. Thanks for the advice.

scripta

Senior Member - 6K

posted: Jul. 16, 2016 @ 9:58p

How long do you plan to stay in the area? If not too long and the market tanks when you need to sell, you should be prepared to take some losses.

How much do you have for downpayment? The smart thing to do is to have at least 20% down and not take more than $417K for the mortgage due to (usually) better rates and lower costs. A loan for $417,001 is significantly more expensive than a loan for $417,000.

I don't know of a rule of thumb. Some people say get as much house as you can afford, but those people also think that home prices always go up. I think 2-5 times your annual salary is relatively safe. When I bought, I made sure that I would break even or make a few bucks by renting out my house in a worst case scenario (if I had to move, lost my job, couldn't sell the house, etc). Rents only go down in a severe downturn or mismanaged areas, so this risk is very small.

Your $1750 is a monthly principal+interest payment on a $395K 30-yr fixed loan at 3.375% APR. This does not include homeowners insurance or property taxes, but it also doesn't include the income tax deduction for mortgage interest and property tax. Of course this also doesn't include maintenance, which can be significant -- lawn care, plumber, electric, roof, etc. Utility bills could also be higher if the new place is bigger or less efficient than the one you're renting. So get some estimates, run any possible scenarios, and make sure you are comfortable with the numbers.

scripta

Senior Member - 6K

posted: Jul. 16, 2016 @ 10:05p

Oh, there's another rule of thumb to not spend more than 30% of your income on housing.

How much house do you need? Bigger house means more cleaning, higher bills, more maintenance. More space to fill with junk you don't need

ltnawlins

New Member

posted: Jul. 16, 2016 @ 10:12p

Is that 30% based off net income or gross? We would like to start a family in a few years. Would it be better to buy something larger and grow into it over time or get something that will meet our needs now?

brettdoyle

Senior Member - 4K

posted: Jul. 16, 2016 @ 11:18p

Sounds like you would be better off renting and then buy something in a few years once you need the extra space.

Buying a huge house for the future is an expensive proposition in terms of costs for things like furniture, maintenance, property tax, and utilities.

BigTR

Senior Member

posted: Jul. 17, 2016 @ 12:16a

I'm in Nashville. You can spend $500,000 for a 2000 sf house in East Nashville, $500,000 for a 3,500 sf house in Franklin or $350,000 for a 3,500 sf home in Mt. Juliet or Hendersonville.

Where are you looking to buy?

MonkeyingAround

Wacky Member

posted: Jul. 17, 2016 @ 12:17a

Just because you are preapproved for $450k doesn't mean you are forced to buy a $450k house. If there are multiple offers for the houses you are looking for, the extra cushion will give you an advantage over the next offer.

scripta

Senior Member - 6K

posted: Jul. 17, 2016 @ 1:36a

ltnawlins said: Is that 30% based off net income or gross?Gross, usually, but you could aim for net. The difference between gross and net may not be that significant for you -- if you can both max out your pre-tax retirement contributions ($18K each into 401k's), then deduct mortgage interest and property taxes, your tax liability might be pretty low.

ltnawlins said: Would it be better to buy something larger and grow into it over time or get something that will meet our needs now?Nobody can tell answer this for you. It depends. I'm guessing that a tiny 1-br condo can meet your needs now, but if you can buy a 2000 sq ft home, what would you rather do?

You should do what you are comfortable with. You haven't mentioned any of your expenses besides student and car loans. If you're blowing through your income and not saving anything, then you can't afford to buy any home. If you're saving $5K+/mo, you're a prodigy and can buy whatever you want. If you're saving something in between, then you can buy something in between.

ogp

Member

posted: Jul. 17, 2016 @ 8:22a

ltnawlins said: Is that 30% based off net income or gross? We would like to start a family in a few years. Would it be better to buy something larger and grow into it over time or get something that will meet our needs now?

Don't forget to factor in loss of income if going down to single earner household or daycare costs, which can easily be $10k per year.I think for your first house, spending as little as possible isn't a bad idea. As you live there, you'll see if you are comfortable DIYing things or paying someone to do them. And you'll be able to experience and get used to all the things that come with owning a home that you never even thought of, without being strapped for cash.

ltnawlins

New Member

posted: Jul. 17, 2016 @ 8:46a

We currently max out my 401k and save another 20% in my wife's. Are monthly expenses are around 3900 even with the high rent and debt payments due to our employers paying all heath premiums and cell phones. We are left with 1k or so after everything is done each month, so I feel like we can go up to $2000 a month and still have a small cushion. We've found some really nice options in the county south of where Nashville is located. Brand new 2500 sqft homes for around 300k, but the commute will be much, much longer.

Thanks again for the advice.

BostonOne

Ancient Member

posted: Jul. 17, 2016 @ 9:07a

I've been a homeowner for over 12 years. Here are things that help me sleep better at night:

1) My first place was somewhere I could easily afford. I think I was originally pre-approved for a $500K mortgage and ended up taking out a $350K mortgage.

2) I have an emergency fund that can cover mortgage & expenses for 6 months. That way no need to panic in an unemployment situation.

3) Do a complete accounting of the additional expenses you will take on, both one-time & recurring. The one-time costs can be significant including closing costs, moving, furniture, tools, etc. There will also be unexpected expenses and you need to set aside somewhere between a few thousand and several thousand dollars to account for this. For recurring costs, others above have mentioned them - utilities, taxes, lawn care, maintenance, irrigation, pest control, etc. Make sure you have a good command of what these will all be. Don't forget any changed commuting expenses if you are moving outside of the city center. Will you be ordering in meals more/less due to your new location? How will that affect your expenses?

4) Have a plan in place in case your income goes away or is negatively impacted. What expenses would be the first to go? How would you reduce expenditures to a minimum?

sclantw

Senior Member

posted: Jul. 17, 2016 @ 12:16p

To OP: I would finish the following before considering buying a house with 15-yr fixed rate mortgage monthly charges no more than 1/4 of your pre-taxed income/mo.

1. pay off all debt so you don't have monthly payment to the debt.2. have 6-mo emergency fund saved up3. save up more than 20% down payment

To speed up the process, try renting something that requires only half of what you are paying now assuming you don't have kids. Two people with $1750/mo rent in TN seems too much when the avg. is ~$1200.

If you wish not to make the above sacrifice to lower your expense, then you need to out-earn your decision and get extra one or two jobs to increase your income. The worst (and possibly the dumbest) decision you can make right now is to get a house you can't afford when you are already living paycheck to paycheck. One misstep (economy downturn, getting fired, etc) will turn your dream into a nightmare.

Of course the lender would want you to buy the biggest house there is because they don't care. It's the same reason why they would lend people who just turned 18, no income, thousands of dollars for school. They are not responsible for the debt, you are. They are the ones benefit from the interests though.

How about calling Dave Ramsey and ask for his opinion since you are in the same town and real estate/rental is one of his specialties? You may get the cold hard truth in the hard way but he may have something smarter that can be helpful.

ltnawlins

New Member

posted: Jul. 17, 2016 @ 1:42p

sclantw said: To OP: I would finish the following before considering buying a house with 15-yr fixed rate mortgage monthly charges no more than 1/4 of your pre-taxed income/mo.

1. pay off all debt so you don't have monthly payment to the debt.2. have 6-mo emergency fund saved up3. save up more than 20% down payment

To speed up the process, try renting something that requires only half of what you are paying now assuming you don't have kids. Two people with $1750/mo rent in TN seems too much when the avg. is ~$1200.

If you wish not to make the above sacrifice to lower your expense, then you need to out-earn your decision and get extra one or two jobs to increase your income. The worst (and possibly the dumbest) decision you can make right now is to get a house you can't afford when you are already living paycheck to paycheck. One misstep (economy downturn, getting fired, etc) will turn your dream into a nightmare.

Of course the lender would want you to buy the biggest house there is because they don't care. It's the same reason why they would lend people who just turned 18, no income, thousands of dollars for school. They are not responsible for the debt, you are. They are the ones benefit from the interests though.

How about calling Dave Ramsey and ask for his opinion since you are in the same town and real estate/rental is one of his specialties? You may get the cold hard truth in the hard way but he may have something smarter that can be helpful.

You might have missed it, but we're maxing out my 401k and saving another 20% in my wife's. Leftover with 1.1k a month after all bills.

novocane

Ancient Member

posted: Jul. 17, 2016 @ 2:30p

Rule of thumb is no more than 1/3 gross income on housing expenses (mortgage + property taxes + hoa/coa dues). That is slightly conservative as I think banks will approve up to .42 for housing.

scripta

Senior Member - 6K

posted: Jul. 17, 2016 @ 2:37p

20% of what in your wife's? 20% of your wife's income? Because 20% of $110K would put her over the $18K limit.

So you're saying you only spend $1150/mo (3900-1K debt-1750 rent) on everything else? Are you sure you are that frugal?

Do you have 20% for a downpayment plus a 6-months emergency fund to cover all expenses?

jerosen

Geeky member

posted: Jul. 17, 2016 @ 2:41p

If you're planning on kids in the future than make sure to look at the quality of schools where you buy. That wasn't even on my radar at your age.

mwa423

Senior Member - 1K

posted: Jul. 17, 2016 @ 3:33p

jerosen said: If you're planning on kids in the future than make sure to look at the quality of schools where you buy. That wasn't even on my radar at your age.

I would ignore this advice having recently gone through a first time home purchase. I could have bought in an area with great schools, but at that point property taxes were 2x-4x what I ended up with. You have no child now and so why pay for good schools 5+ years before you need them? Think of hoa fees and property taxes as basically rent, money you will spend and never see again. A second issue is that school districts can change (for better or worse) in the next 5+ years, I'd suggest researching that when the time comes.

Since this is unlikely to be the house you live out the rest of your days in, I'd strongly suggest finding and only paying for what will meet your needs for the next few years. I assume you can do that in Nashville for far less than $400k

DPG

Ancient Member

posted: Jul. 17, 2016 @ 4:20p

Do you have 20% to put down? Not necessarily to pay upfront but in reserve to cover your possible losses should things go south.

ltnawlins

New Member

posted: Jul. 17, 2016 @ 4:30p

We have 8 months reserves plus 60k we could use as a down payment. We definitely are hoping to stay below 300k, doesn't make sense to spend any more before we have kids.

Thanks everyone.

letsspendlotsofmoney

Broke Member

posted: Jul. 17, 2016 @ 6:14p

Figure out what you can afford and use that number to for what you can afford on a 15 year mortgage. Then get a 30 year mortgage and pay the 15 year payment. If you have to cut back you can always afford the 30 year payment. If you max out your 30 year payment and the wife gets pregnant and wants to take off you might get very tight on a single income.

letsspendlotsofmoney said: 400k 30yr approx 1800 month plus taxes on 400k house250k 15yr approx 1700 month plus lower taxes250k 30yr approx 1100 month you can always pay the 15yr payment if you have extra but a very comfy payment if needed. These numbers are also without property tax or HO insurance, which vary in size by location. If comparing how much one can afford, those need to be added in..For me, I have a 155k 80LTV 30yr that runs $750, but if property tax and HO insurance is added in then it's $1250. The property tax / HO insurance is almost equal to the full mortgage payment.

letsspendlotsofmoney

Broke Member

posted: Jul. 17, 2016 @ 7:49p

Bend3r said: letsspendlotsofmoney said: 400k 30yr approx 1800 month plus taxes on 400k house250k 15yr approx 1700 month plus lower taxes250k 30yr approx 1100 month you can always pay the 15yr payment if you have extra but a very comfy payment if needed. These numbers are also without property tax or HO insurance, which vary in size by location. If comparing how much one can afford, those need to be added in..For me, I have a 155k 80LTV 30yr that runs $750, but if property tax and HO insurance is added in then it's $1250. The property tax / HO insurance is almost equal to the full mortgage payment.

That's what I was trying to say.. I am assuming taxes and insurance will be proportional...

I everyone based what the could afford on a 15 year mortgage we may not have had the extreme housing inflation 90's and 2000's ..

Why not base what you can afford on a 40yr mortgage or better yet... a interest only mortgage.. That could never go bad...

After the last crash I have become more conservative in my spending and working on paying of my in the next 5-7 years.. My mortgage doesn't generate enough interest for a deduction on my taxes so why do I need to carry a mortgage?

Jamieson22

Senior Member

posted: Jul. 18, 2016 @ 8:19a

As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc).

Chrisk327

Senior Member

posted: Jul. 18, 2016 @ 8:58a

mwa423 said: jerosen said: If you're planning on kids in the future than make sure to look at the quality of schools where you buy. That wasn't even on my radar at your age.

I would ignore this advice having recently gone through a first time home purchase. I could have bought in an area with great schools, but at that point property taxes were 2x-4x what I ended up with. You have no child now and so why pay for good schools 5+ years before you need them? Think of hoa fees and property taxes as basically rent, money you will spend and never see again. A second issue is that school districts can change (for better or worse) in the next 5+ years, I'd suggest researching that when the time comes.

Since this is unlikely to be the house you live out the rest of your days in, I'd strongly suggest finding and only paying for what will meet your needs for the next few years. I assume you can do that in Nashville for far less than $400k As it is said everywhere, real estate is local. what works in 1 market, doesn't in another.

in my area, you buy an area with good/great schools regardless. yes, you can get in a cheaper area, but the downside is the appreciation is lower in the lower quality school areas and the property taxes are similar.

Chrisk327

Senior Member

posted: Jul. 18, 2016 @ 9:17a

Jamieson22 said: As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc). I think he should get a house and not a ballpark.

I think these general "rule of thumb" crap doesn't make any sense, its for TV soundbites and fluff news articles.there are so many variables in relation to a person's cash flows as well as the housing market structures.

The OP could be blowing most of his money and no be disiplined enough to spend the 1/3 on housing, plus utilities and upkeep and maybe he should only be spending what his rent payment is. Who knows!Do the math and see what you're comfortable with. In my area, taxes are between $9-18K on normal houses. Insurance is between $1-2K. In other areas, taxes are $2K. In my area, taxes end up being 1/3-1/2 your payment.

You take that 400K mortgage with an 1800 payment and add taxes and insurance and you're at about $3K. Now doing the math on the tax situation, is person specific, but would could be getting a benefit of $900 on that a month even. bringing your net outlay to $2100, plus utilities and upkeep.

The other overarching platitude, I will make is, buy in the area you want to live in, even if you end up spending a bit more than you planned. You can do the math and be conservative, and thats great, until the only area you can buy on that budget is either the ghetto or far out from where you want to be, if that is the case, reconsider your budget or buying. Don't buy far out from the area you want to be in or in a crappy area, just to meet budget. you'll regret it from an appreciation POV, commute, quality of life.

ltnawlins said: We have 8 months reserves plus 60k we could use as a down payment. We definitely are hoping to stay below 300k, doesn't make sense to spend any more before we have kids.

Thanks everyone. Good analysis. Stay below $300k and you will be fine

knowit2

Senior Member

posted: Jul. 18, 2016 @ 6:21p

Keep in mind that you want 20% down to get rid of PMI which can get very expensive.So if you have $40K in a down payment that will limit your house to $200k.Also try to get the cheapest (lowest cost) house in the neighborhood. Let all the neighbors raise your value.

rascott

Senior Member - 1K

posted: Jul. 20, 2016 @ 3:35p

Chrisk327 said: Jamieson22 said: As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc). I think he should get a house and not a ballpark.

I think these general "rule of thumb" crap doesn't make any sense, its for TV soundbites and fluff news articles.there are so many variables in relation to a person's cash flows as well as the housing market structures.

The OP could be blowing most of his money and no be disiplined enough to spend the 1/3 on housing, plus utilities and upkeep and maybe he should only be spending what his rent payment is. Who knows!Do the math and see what you're comfortable with. In my area, taxes are between $9-18K on normal houses. Insurance is between $1-2K. In other areas, taxes are $2K. In my area, taxes end up being 1/3-1/2 your payment.

You take that 400K mortgage with an 1800 payment and add taxes and insurance and you're at about $3K. Now doing the math on the tax situation, is person specific, but would could be getting a benefit of $900 on that a month even. bringing your net outlay to $2100, plus utilities and upkeep.

The other overarching platitude, I will make is, buy in the area you want to live in, even if you end up spending a bit more than you planned. You can do the math and be conservative, and thats great, until the only area you can buy on that budget is either the ghetto or far out from where you want to be, if that is the case, reconsider your budget or buying. Don't buy far out from the area you want to be in or in a crappy area, just to meet budget. you'll regret it from an appreciation POV, commute, quality of life.

Good grief, where is that where taxes are that high? That's outrageous.

Bend3r

Thrifty Member

posted: Jul. 20, 2016 @ 3:49p

rascott said: Chrisk327 said: Jamieson22 said: As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc). I think he should get a house and not a ballpark.

I think these general "rule of thumb" crap doesn't make any sense, its for TV soundbites and fluff news articles.there are so many variables in relation to a person's cash flows as well as the housing market structures.

The OP could be blowing most of his money and no be disiplined enough to spend the 1/3 on housing, plus utilities and upkeep and maybe he should only be spending what his rent payment is. Who knows!Do the math and see what you're comfortable with. In my area, taxes are between $9-18K on normal houses. Insurance is between $1-2K. In other areas, taxes are $2K. In my area, taxes end up being 1/3-1/2 your payment.

You take that 400K mortgage with an 1800 payment and add taxes and insurance and you're at about $3K. Now doing the math on the tax situation, is person specific, but would could be getting a benefit of $900 on that a month even. bringing your net outlay to $2100, plus utilities and upkeep.

The other overarching platitude, I will make is, buy in the area you want to live in, even if you end up spending a bit more than you planned. You can do the math and be conservative, and thats great, until the only area you can buy on that budget is either the ghetto or far out from where you want to be, if that is the case, reconsider your budget or buying. Don't buy far out from the area you want to be in or in a crappy area, just to meet budget. you'll regret it from an appreciation POV, commute, quality of life.

Good grief, where is that where taxes are that high? That's outrageous. TX $750 mortgage would be ~$1250 with taxes and homeowner's insurance.

RedWolfe01

Senior Member - 4K

posted: Jul. 21, 2016 @ 7:57a

Bend3r said: rascott said: Chrisk327 said: Jamieson22 said: As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc). I think he should get a house and not a ballpark.

I think these general "rule of thumb" crap doesn't make any sense, its for TV soundbites and fluff news articles.there are so many variables in relation to a person's cash flows as well as the housing market structures.

The OP could be blowing most of his money and no be disiplined enough to spend the 1/3 on housing, plus utilities and upkeep and maybe he should only be spending what his rent payment is. Who knows!Do the math and see what you're comfortable with. In my area, taxes are between $9-18K on normal houses. Insurance is between $1-2K. In other areas, taxes are $2K. In my area, taxes end up being 1/3-1/2 your payment.

You take that 400K mortgage with an 1800 payment and add taxes and insurance and you're at about $3K. Now doing the math on the tax situation, is person specific, but would could be getting a benefit of $900 on that a month even. bringing your net outlay to $2100, plus utilities and upkeep.

The other overarching platitude, I will make is, buy in the area you want to live in, even if you end up spending a bit more than you planned. You can do the math and be conservative, and thats great, until the only area you can buy on that budget is either the ghetto or far out from where you want to be, if that is the case, reconsider your budget or buying. Don't buy far out from the area you want to be in or in a crappy area, just to meet budget. you'll regret it from an appreciation POV, commute, quality of life.

Good grief, where is that where taxes are that high? That's outrageous. TX $750 mortgage would be ~$1250 with taxes and homeowner's insurance.

My taxes are 3% a year in TX. On that $400K house you are looking at $1000 a month, after Homestead exemption.

Chrisk327

Senior Member

posted: Jul. 22, 2016 @ 3:46p

rascott said: Chrisk327 said: Jamieson22 said: As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc). I think he should get a house and not a ballpark.

I think these general "rule of thumb" crap doesn't make any sense, its for TV soundbites and fluff news articles.there are so many variables in relation to a person's cash flows as well as the housing market structures.

The OP could be blowing most of his money and no be disiplined enough to spend the 1/3 on housing, plus utilities and upkeep and maybe he should only be spending what his rent payment is. Who knows!Do the math and see what you're comfortable with. In my area, taxes are between $9-18K on normal houses. Insurance is between $1-2K. In other areas, taxes are $2K. In my area, taxes end up being 1/3-1/2 your payment.

You take that 400K mortgage with an 1800 payment and add taxes and insurance and you're at about $3K. Now doing the math on the tax situation, is person specific, but would could be getting a benefit of $900 on that a month even. bringing your net outlay to $2100, plus utilities and upkeep.

The other overarching platitude, I will make is, buy in the area you want to live in, even if you end up spending a bit more than you planned. You can do the math and be conservative, and thats great, until the only area you can buy on that budget is either the ghetto or far out from where you want to be, if that is the case, reconsider your budget or buying. Don't buy far out from the area you want to be in or in a crappy area, just to meet budget. you'll regret it from an appreciation POV, commute, quality of life.

Good grief, where is that where taxes are that high? That's outrageous. I'm in NY on Long Island. Nassau CountyUnlike TX, we have the distinct benefit of having these type of taxes and a nice fat state income tax of 6.65%

Chrisk327 said: rascott said: Chrisk327 said: Jamieson22 said: As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc). I think he should get a house and not a ballpark.

I think these general "rule of thumb" crap doesn't make any sense, its for TV soundbites and fluff news articles.there are so many variables in relation to a person's cash flows as well as the housing market structures.

The OP could be blowing most of his money and no be disiplined enough to spend the 1/3 on housing, plus utilities and upkeep and maybe he should only be spending what his rent payment is. Who knows!Do the math and see what you're comfortable with. In my area, taxes are between $9-18K on normal houses. Insurance is between $1-2K. In other areas, taxes are $2K. In my area, taxes end up being 1/3-1/2 your payment.

You take that 400K mortgage with an 1800 payment and add taxes and insurance and you're at about $3K. Now doing the math on the tax situation, is person specific, but would could be getting a benefit of $900 on that a month even. bringing your net outlay to $2100, plus utilities and upkeep.

The other overarching platitude, I will make is, buy in the area you want to live in, even if you end up spending a bit more than you planned. You can do the math and be conservative, and thats great, until the only area you can buy on that budget is either the ghetto or far out from where you want to be, if that is the case, reconsider your budget or buying. Don't buy far out from the area you want to be in or in a crappy area, just to meet budget. you'll regret it from an appreciation POV, commute, quality of life.

Good grief, where is that where taxes are that high? That's outrageous. I'm in NY on Long Island. Nassau CountyUnlike TX, we have the distinct benefit of having these type of taxes and a nice fat state income tax of 6.65%

I recommend another line of thought: How modest of a home would you be comfortable living in? Start there. Housing is a consumable and for many people comes with incredible, unrecognized opportunity cost.

RedWolfe01

Senior Member - 4K

posted: Jul. 25, 2016 @ 2:13p

Chrisk327 said: rascott said: Chrisk327 said: Jamieson22 said: As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc). I think he should get a house and not a ballpark.

I think these general "rule of thumb" crap doesn't make any sense, its for TV soundbites and fluff news articles.there are so many variables in relation to a person's cash flows as well as the housing market structures.

The OP could be blowing most of his money and no be disiplined enough to spend the 1/3 on housing, plus utilities and upkeep and maybe he should only be spending what his rent payment is. Who knows!Do the math and see what you're comfortable with. In my area, taxes are between $9-18K on normal houses. Insurance is between $1-2K. In other areas, taxes are $2K. In my area, taxes end up being 1/3-1/2 your payment.

You take that 400K mortgage with an 1800 payment and add taxes and insurance and you're at about $3K. Now doing the math on the tax situation, is person specific, but would could be getting a benefit of $900 on that a month even. bringing your net outlay to $2100, plus utilities and upkeep.

The other overarching platitude, I will make is, buy in the area you want to live in, even if you end up spending a bit more than you planned. You can do the math and be conservative, and thats great, until the only area you can buy on that budget is either the ghetto or far out from where you want to be, if that is the case, reconsider your budget or buying. Don't buy far out from the area you want to be in or in a crappy area, just to meet budget. you'll regret it from an appreciation POV, commute, quality of life.

Good grief, where is that where taxes are that high? That's outrageous. I'm in NY on Long Island. Nassau CountyUnlike TX, we have the distinct benefit of having these type of taxes and a nice fat state income tax of 6.65%

5x? The op, making $110k per year would be "safe" buying a $550k place?

letsspendlotsofmoney

Broke Member

posted: Jul. 26, 2016 @ 12:35p

Jamieson22 said: scripta said: I think 2-5 times your annual salary is relatively safe. 5x? The op, making $110k per year would be "safe" buying a $550k place? Can you? or Should you? Maxing our on a home purchase when there might be potential to lose an income due to child birth or job loss would be scary. I would definitely base house payment on only one income and 2-3x salary tops for purchase price.

Chrisk327

Senior Member

posted: Jul. 26, 2016 @ 2:07p

RedWolfe01 said: Chrisk327 said: rascott said: Chrisk327 said: Jamieson22 said: As a ballpark, 2-3x annual gross income, assuming no major financial factors that would impact this (like 30% going toward child support, etc). I think he should get a house and not a ballpark.

I think these general "rule of thumb" crap doesn't make any sense, its for TV soundbites and fluff news articles.there are so many variables in relation to a person's cash flows as well as the housing market structures.

The OP could be blowing most of his money and no be disiplined enough to spend the 1/3 on housing, plus utilities and upkeep and maybe he should only be spending what his rent payment is. Who knows!Do the math and see what you're comfortable with. In my area, taxes are between $9-18K on normal houses. Insurance is between $1-2K. In other areas, taxes are $2K. In my area, taxes end up being 1/3-1/2 your payment.

You take that 400K mortgage with an 1800 payment and add taxes and insurance and you're at about $3K. Now doing the math on the tax situation, is person specific, but would could be getting a benefit of $900 on that a month even. bringing your net outlay to $2100, plus utilities and upkeep.

The other overarching platitude, I will make is, buy in the area you want to live in, even if you end up spending a bit more than you planned. You can do the math and be conservative, and thats great, until the only area you can buy on that budget is either the ghetto or far out from where you want to be, if that is the case, reconsider your budget or buying. Don't buy far out from the area you want to be in or in a crappy area, just to meet budget. you'll regret it from an appreciation POV, commute, quality of life.

Good grief, where is that where taxes are that high? That's outrageous. I'm in NY on Long Island. Nassau CountyUnlike TX, we have the distinct benefit of having these type of taxes and a nice fat state income tax of 6.65%

How much of that is paying for Shoreham? far as I can tell, not too much most of that is school taxes

Skipping 9 Messages...

scripta

Senior Member - 6K

posted: Jul. 27, 2016 @ 11:11a

wilked said: We should really abandon the premise of 30% being a number that means anything. What it really means is something more like "if you suffer no financial surprises, hit no road bumps, and don't prioritize saving, 30% works perfectly"The article implies that the number really depends on income:1) "it’s almost meaningless now, when almost 41 million U.S. households spend more" and "If your income is $500,000 a year, you can pay 40 percent and still have money left" -- 30% is too low!2) "if your income is $20,000 a year, it will be hard to make ends meet if you’re paying 30 percent of your income on rent" -- 30% is too high!

OP's household income is twice higher than the median household income and they should have plenty left over for growing an emergency fund to cover financial surprises, road bumps, etc. OP asked for a rule of thumb, and IMO the "no more than 30%" rule of thumb is reasonable for their situation.

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